Big Trouble At Yahoo

By Sal Bommarito

Yahoo just reported earnings. Revenues in the first quarter fell 11% to $1.09 billion resulting in a net loss of $99 million. In the same period last year, the company had revenue of $1.23 billion and net income of $21 million.

Yahoo is engaged in a “strategic alternative process,” meaning the company is considering the sale of huge chunks of its business. Marissa Mayer, CEO, is controlling the process, but has been accused of “dragging her feet.” Apparently, she would like more time to turn the company around.

Yahoo’s board and one of its large shareholders are demanding that the company take extraordinary action now. First bids for Yahoo’s core Internet business are in and Verizon is considered the leading contender. A special committee of the board is evaluating the bids received.

The base businesses have been operating poorly in recent years, something that Mayer was unable to fixed since being named CEO in 2012. However, the company has some very valuable assets that account for the lion’s share of its overall value. The assets include a $32 billion investment in the Chinese e-commerce company Alibaba. In January, Yahoo called off efforts to do a tax-free spinoff of Alibaba to Yahoo shareholders.

Starboard Value hedge fund and large stockholder has proposed to replace the entire Yahoo board as well as Mayer. Starboard has been aggressively demanding the company sell off assets for months.

Yahoo’s future is unclear. It’s stock price hit a high point of about $108 in 2000 and it now sells for about $37 per share. It has a market capitalization of around $36 billion.

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